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'So much money on the line': No corner of Texas untouched as Trump's tariffs set off trade war with China

Trump's protectionist agenda has entangled the state's trade-heavy economy on a staggering scale, stoking fears from Texas business and political leaders.

President Donald Trump on Friday removed any doubt about whether the U.S. is in a trade war by imposing tariffs on $34 billion worth of Chinese goods. Beijing responded in kind. Texas is caught in the middle.(Jim Urquhart / The Associated Press)

And while he makes clear he likes the dealer in chief — explaining that he's glad President Donald Trump "is there in the game for us" — he can't help but look with trepidation at his latest hand in the wake of extraordinary antes made Friday by the U.S. and China.

Among the dueling tariffs imposed on a combined $68 billion in goods was retaliation that Beijing aimed at cotton and grain sorghum — cash crops for Nedbalek and many other Texas farmers.

"I don't think there has ever been a time when there is so much money on the line," said the 77-year-old, who sees nearly all the harvest from his 6,000-acre operation exported to China.

Texas is now all-in on the president's trade war — whether the state likes it or not.

Payback from China and other countries for Trump's trade actions now covers billions of dollars in Texas exports, according to data collected by the U.S. Census Bureau. That hit, focused on the ag and energy industries, appears to be greater than what's being felt in any other U.S. state.

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Texas has likewise borne the brunt of Trump's steel and aluminum tariffs. The state would also feel a keen impact if the U.S. ends up imposing levies on imported cars or if China follows through on a pledge to slap duties on crude oil, petrochemicals and other Texas stalwarts.

No corner of the Texas economy is likely to go untouched.

"Unprecedented," said Jeff Schott, a senior fellow at the Washington-based Peterson Institute for International Economics. "In the past, a big trade dispute was a billion dollars. This is orders of magnitude bigger."

No surprise

That such a Rubicon has been crossed is really no surprise.

Trump has railed against America's treatment on the international stage from his earliest days on the White House campaign trail. He's pressed a need to protect American workers at all costs, particularly when it comes to jobs in the beleaguered Rust Belt. Moreover, the president says his efforts to upturn the trade status quo are working.

"We are going to make great deals," Trump said Thursday night at a rally in Montana, pointing also to a strong U.S. economy. "We hold all the cards. We are the bank everybody is stealing from."

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The bullish outlook belies clamors of concern emanating from Texas.

Politicians from Gov. Greg Abbott on down — both Republican and Democrat — have warned about economic pain. The state's vast business community, from corporate titans to family-owned outfits, has likewise launched frantic lobbying efforts to sway the White House.

The economy is doing perhaps better than ever before, and that’s prior to fixing some of the worst and most unfair Trade Deals ever made by any country. In any event, they are coming along very well. Most countries agree that they must be changed, but nobody ever asked!

The economic behemoth has indeed flooded the global market with excess steel. That's the impetus for the metal tariffs. It also has no doubt flouted conventions related to intellectual property rights and other trade practices. That's the rationale for the latest trade move.

"He's doing some things that haven't been done in the past — that were maybe a little bit overdue," said Nedbalek, the South Texas farmer.

"An escalating trade war will result in a disruption to the market that will just have significant impact across the board," said Todd Staples, president of the Texas Oil and Gas Association and a former state agriculture commissioner.

The historic blows exchanged Friday between the U.S. and China spotlight those dynamics, starting with the levies Trump imposed on $34 billion worth of Chinese goods.

The White House has said its tariff list was designed to limit harm to American consumers by avoiding most household items. And the administration did indeed recalibrate the targets after receiving public feedback, removing tariff lines on flat-screen TVs and other goods.

But tariffs on imports are ultimately taxes paid by someone in the U.S.

Adrienne Braumiller, a Dallas-based trade attorney representing Sanden and other businesses, said she was unable to provide an update on Sanden's next move. But she also laid bare the fact that many Texas companies, because of one trade move or another, are now in a tough spot.

"The current administration would be very disappointed if jobs are reduced and manufacturing is also reduced," she said. "And that's something companies are considering."

Retaliation from China on $34 billion worth of U.S. goods, meanwhile, had a significant impact even before it was officially implemented.

Those tariffs take aim at U.S. agricultural mainstays like cotton, grain sorghum, soybeans and wheat by raising the prices on those goods in China. That ends up reducing demand, driving down commodity prices and leaving American farmers effectively holding the bill.

"It's happening already," said Russell Boening, president of the Texas Farm Bureau. "The prices reacted right away when the threats were being lobbed back and forth."

Many Texas farmers are trying to stay optimistic, especially since Trump has promised to protect a community he talks about with near-reverence.

Wade Cowan is an eighth-generation Texas farmer who now has three crops targeted on his 1,500-acre operation outside Lubbock. He's avoiding the "doom and gloom" for now. That's in part because his sales season isn't until later in the year. Still, if the trade skirmish drags on — and he emphasizes "if" — "this could affect things pretty dramatically," he said.

So many factors come into play. Nedbalek, the South Texan, pointed to grain sorghum.

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In some ways, the fact that China's new tariff on that crop is just 25 percent is a relief, he said. Earlier in the year, Beijing imposed and then eventually removed a crippling 178 percent levy on the product, which is popular in China as animal feed.

"That made us feel real special," Nedbalek said with a laugh.

But margins are always thin, particularly given the whims of Mother Nature. Last year was a bumper crop, causing many farmers to load up on expenses. Now a drought in many parts of Texas has wrecked this year's yield — "the worst time in the world to have a bad crop," he said.

"We're really vulnerable," Nedbalek said, explaining that low market prices, driven in large part by the tariffs, will make it "really hard for the numbers to work."

From farm to factory — and everywhere in between — the question has now become how long will Trump's trade tiff last. Especially when it comes to China.

More tariffs threatened

Beijing on Friday blamed the U.S. for starting "the largest trade war in economic history to date." Both sides have threatened additional rounds of tariffs, while China already appears to be exacting indirect forms of revenge. Experts point out that one key variable could be that the U.S. imports many more Chinese goods than vice versa.

"There are limitations to what China will be able to do, in part because China has a lot more to lose," said Scott Paul, president of the Alliance for American Manufacturing and a supporter of Trump's trade approach.

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But some damage may not be reversed with ease.

Nedbalek noted that the U.S. ag industry has spent years cultivating markets in China, calling the country a "great friend to South Texas agriculture." He worries that once Texas loses its part of that market, it may not come back in the same way.

Such an outcome would be felt well beyond the fields. All kinds of industries connected to agriculture, from tire shops to fast-food restaurants to fuel suppliers, "will feel the economic pinch from agriculture being in this real tight spot," he said.

"Unfortunately, it's like when you pray, 'I want patience, but I want it right now,'" Nedbalek said. "We're at that place now."

Tom Benning. Tom covers the intersection of business and government in Washington.
He came to D.C. in 2016 from The News' Austin bureau. He has also previously worked in Dallas, covering everything from City Hall to transportation to former President George W. Bush. He is a graduate of the University of South Carolina.